BUSHRA BIBI AND ANOTHER v. METHOD BUILDING & ENGINEERING WORKS LTD (in liquidation) AND OTHERS

HCPI 301/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 301 OF 2012

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D E C I S I O N

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1.  On 8 April 2014, I handed down my reasons for judgment, following a trial on liability, and said:

“1. The trial on liability in this action that took place on 27 March 2014 was reduced to a trial on the issue of contributory negligence on the part of Khalid Mehmood, deceased (“the deceased”), the parties having agreed all other the matters in relation to liability, contribution as between defendants, and costs [1]. At the conclusion of the proceedings, I found that the deceased was not guilty of contributory negligence and, pursuant to the agreement that had been reached between the parties, I entered interlocutory judgment in favour of the plaintiffs against the 1^st and 2^nd defendants for damages to be assessed or agreed. I awarded the costs of the action to the plaintiffs against the 1^st and 2^nd defendants, and I also ordered the 1^st and 2^nd defendants to pay the costs incurred by the plaintiffs in pursuing their claims against the 3^rd defendant. In respect of the contribution proceedings, I ordered, by consent, that the 1^st and 2^nd defendants were entitled to contribution from the 3^rd defendant of 33.5% of the damages, interest and costs payable by 1^st and 2^nd defendants to the plaintiffs, but that, as between the defendants, there be no order as to costs. Finally, I made no order as to costs as between the plaintiff and the 3^rd defendant but I directed that 33.5% of the plaintiffs’ costs, that was recoverable by the 1^st and 2^nd defendants from the 3^rd defendant pursuant to my contribution order, was 33.5% of the entirety of the plaintiffs’ taxed costs, inclusive of the costs incurred by the plaintiffs in pursuit of their claims against the 3^rd defendant.

[1] Save for the outstanding matter of the costs of the solicitors of the Intervener that have been incurred on the issues of liability and contributory negligence.

2.  In consequence, interlocutory judgment was entered for damages to be assessed or agreed and an order was drawn up, in the terms of my reasons for judgment, that the 3^rd defendant do pay, to the 1^st and 2^nd defendants, 33.5% of the damages, interest and costs payable by 1^st and 2^nd defendants to the plaintiffs.

3.  Subsequently, the defendants disagreed on the meaning of my order: whether the contribution to be made was 33.5% of the damages, net of employees’ compensation paid, or whether the contribution to be made was 33.5% of the gross damages, before the deduction of employees’ compensation.  Upon application made to me by letter dated 27 August 2014 to resolve the difference, and after hearing further from the parties, I gave the following directions on 23 September 2014:

“A difference has arisen between the 1st and 2nd defendants, on the one part, and the 3rd defendant, on the other part, as to the meaning of my order made on 8 April 2014 that the 1st and 2nd defendants were entitled to contribution from the 3rd defendant of 33.5% of the damages, interest and costs payable by the 1st and 2nd defendants to the Plaintiffs.

Specifically, the question has arisen whether the order for contribution relates to 33.5% of the damages, net of employees’ compensation, that is payable by the 1st and 2nd defendants to the plaintiffs, or whether the order for contribution relates to 33.5% of the gross damages, before the deduction of employees’ compensation received by the plaintiffs.

I am prepared to determine the issue at an oral hearing to be fixed or I can determine the matter on paper after receiving written submissions from the parties. I will make appropriate directions after I hear from the parties on how they wish to proceed.

The submissions I receive from the parties must canvas the question whether or not the court is functus and unable to determine this issue.”

4.  Following upon further correspondence, I gave further directions for written submissions and reply submissions to be exchanged. I have received and perused these submissions.  I am able to reach my decision without the need for an oral hearing. 

5.  In the notice of contribution and/or indemnity by the 1^st and 2^nd defendants against the 3^rd defendant dated 16 April 2013, the 1^st and 2^nd defendants claimed against the 3^rd defendant:

(a) for an indemnity and/or contribution against the plaintiff’s claim and the costs of this action under the Civil Liability (Contribution) Ordinance in such amount as may be found by the court to be just and equitable having regard to the extent of the 3^rd defendant’s responsibilities for the damages claimed by the plaintiff, and

(b) the full amount of employees’ compensation and costs paid by the 1^st and/or 2^nd defendants in the related employees’ compensation proceedings and the costs incurred by the 1^st and 2^nd defendants in the employees’ compensation proceedings or such part thereof as may be found by the Court to be just and equitable having regard to the extent of the 3^rd defendant’s responsibilities pursuant to the Civil Liability (Contribution) Ordinance and the Employees’ Compensation Ordinance.

6.  It is not in dispute that the 1^st and 2^nd defendants, as the employer and principal contractor, paid employees’ compensation to the 1^st plaintiff, and to Madam Calinog, for herself and her son Shazad Khalid, in related employees’ compensation proceedings. In their joint answer to the plaintiffs’ claims, the 1^st, 2^nd and 3^rd defendants refer to these employees’ compensation proceedings and do not challenge the offer made by the plaintiffs that credit would be given for the employees’ compensation received.  The concession by the plaintiffs that the amount of employees’ compensation already paid must be deducted from the amount of the damages awarded in the common law proceedings is rightly made and gives effect to section 26(1) of the Employees’ Compensation Ordinance, Cap. 282, which provides:

“26. Remedies independently of Ordinance against employer

(1) Where any injury is caused to an employee by the negligence, breach of statutory duty or other wrongful act or omission of the employer, or of any person for whose act or default the employer is responsible, nothing in this Ordinance shall limit or in any way affect any civil liability of the employer independently of this Ordinance:

Provided that any damages awarded against an employer in an action at common law or under any enactment in respect of any such negligence, breach of statutory duty, wrongful act or omission, shall be reduced by the value, as decided by the Court of First Instance or the District Court, as the case may be, of any compensation which has been paid or is payable under the provisions of this Ordinance in respect of the injury sustained by the employee.”

7.  The 1^st and 2^nd defendants claimed from the 3^rd defendant not only contribution towards the amount of damages that may be awarded to the plaintiffs but also the full amount of, or contribution towards, the employees’ compensation paid by the 1^st and 2^nd defendants to the plaintiffs. This claim is also rightly made, having regard to the terms of section 25(1) of the Employees’ Compensation Ordinance and the decision of the Court of Appeal in Yardway Motors Ltd. v. Tam Siu Lun [2005] 2 HKLRD 118.  Section 25(1) provides:

“25. Remedies against both employer and third party

(1) Where the injury in respect of which compensation is payable was caused in circumstances creating a legal liability in some person other than the employer (in this section referred to as the third party) to pay damages to the employee in respect thereof –

(a) the employee may both claim compensation under this Ordinance and take proceedings against the third party in the Court of First Instance or, subject to the provisions of the District Court Ordinance (Cap 336) relating to the limits of jurisdiction, in the District Court to recover damages:

Provided that where any such proceedings are instituted the court in which the action is tried shall, in awarding damages, have regard to the amount which, by virtue of paragraph (b), has become or is likely to become payable to the employer by the third party; and

(b) the employer by whom compensation is payable, and any person who may be called upon to pay an indemnity under section 24 in the case of an employee employed by a sub-contractor, shall have a right of action against the third party for the recovery of any sum which he is obliged to pay as a result of the accident, whether by way of compensation or indemnity or by virtue of any agreement made with the employee prior to the accident, and may exercise such right either by joining in an action begun by the employee against the third party or by instituting separate proceedings:

Provided that the amount recoverable under this paragraph shall not exceed the amount of damages, if any, which in the opinion of the court would have been awarded to the employee but for the provisions of this Ordinance.”

8.  The majority of the Court of Appeal in Yardway Motors Ltd. v. Tam Siu Lun [2005] 2 HKLRD 118 held that this provision did not permit a claim for the recovery of employees’ compensation paid by an employer or a principal contractor who was himself partially responsible for the accident.  However, the Court of Appeal was unanimous in its decision that section 25(1) of the Employees’ Compensation Ordinance did not prevent the employer or principal contractor from seeking contribution towards the employees’ compensation, that he had paid, from a third party tortfeasor “liable in respect of the same damage” pursuant to the provisions of the Civil Liability (Contribution) Ordinance, Cap. 377.  Given the decision of the majority, the 1^st and 2^nd defendants had no other course available to them but to commence contribution proceedings pursuant to the provisions of the Civil Liability (Contribution) Ordinance against the 3^rd defendant to recover the employees’ compensation paid, which they did.

9.  In the notice by the 3^rd defendant to the 1^st and 2^nd defendant claiming contribution and/or indemnity dated 15 October 2013, the 3^rd defendant claimed against the 1^st and 2^nd defendants under the Civil Liability (Contribution) Ordinance for indemnity and/or contribution to the full or such an extent as may be found by the Court to be just and equitable in respect of the plaintiffs’ claims, the costs of the plaintiffs and/or any sum which the plaintiffs may recover herein against the 3^rd defendant, and the 3^rd defendant’s costs.

10.  My order of 8 April 2014 that the 3^rd defendant do pay 33.5% of the damages payable by the 1^st and 2^nd defendants to the plaintiffs has to be understood in the context of the contribution claims and cross claims made and which were brought to an end by that order that I had made with the consent of the parties concerned.

11.  A difference having arisen between the defendants on the meaning of my order, the 1^st and 2^nd defendants applied to me on 27 August 2014 to clarify the meaning of my order: whether the contribution to be made was 33.5% of the damages, net of employees’ compensation paid, or whether contribution to be made was 33.5% of the gross damages, before the deduction of employees’ compensation.

12.  Neither the 1^st and 2^nd defendants nor the 3^rd defendant submitted that I was functus offcio.  I agree.  By this application, I am being asked to interpret my order so as to properly carry it into effect. I am not being asked to review or to vary it.

13.  Having perused and considered the parties’ submissions, I have no hesitation in concluding that my order for the contribution to be made by the 3^rd defendant was in respect of 33.5% of the gross damages, before the deduction of employees’ compensation, assessed or agreed to be payable to the plaintiffs as a result of the damage caused by the 1^st, 2^nd and 3^rd defendants.

14.  Although it did not say so in so many words, the strongest point made by the 3^rd defendant is that the reference to “damages” in my order must be a reference to the damages payable to the plaintiff which, by virtue of section 26(1) of the Employees’ Compensation Ordinance, must be the damages that has been reduced by the value of the employees’ compensation paid.  Hence, 33.5% of “damages” must mean 33.5% of the damages, after the deduction of employees’ compensation.  This is the literal construction of my order which the 3^rd defendant submits I should adopt.

15.  As against that, the use of percentages to determine the extent of the respective contributions to be made by the tortfeasors supports the construction that the percentages referred to the respective extent of responsibility of the several tortfeasors for the damage in question. That, in turn, supports the contrary construction that the order was made in respect of the gross damages, before the deduction of employees’ compensation, assessed or agreed to be payable to the plaintiffs as a result of the damage caused by the 1^st, 2^nd and 3^rd defendants.  It is difficult to conceive of a case where the parties can apply percentages to the award of damages, after deduction of employees’ compensation, as a means of determining their respective responsibility for the damage in question, unless the parties concerned were the employer and the principal contractor who were each 50% to blame for the damage in question and who had each paid 50% of the employees’ compensation awarded.  Indeed, the 3^rd defendant has conceded that it is the gross damages, before deduction of employees’ compensation, that must be reduced by the percentage of contributory negligence that has been assessed on the part of the plaintiff.

16.  The key to the resolution of this difference is to be found in the terms of section 4(1) of the  Civil Liability (Contribution) Ordinance which provides:

“4. Assessment of Contribution

(1) Subject to subsection (3), in any proceedings for contribution under section 3 the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.”

17.  In assessing the amount of contribution of the several tortfeasors who were responsible for the damage in question, it cannot be just and equitable to ignore that fact that one tortfeasor has paid employees’ compensation which has resulted in a reduction of the value of the damages awarded.  As Deputy High Court Judge Carlson found in Chan Wing Fai v. Wong Hon Kwong & Others (HCPI 675/2001; 25 July2002):

“Had there been no employees’ compensation application by the plaintiff, [counsel] would have had no argument to address. His client would have had to contribute to the gross amount. I do not believe that just because a plaintiff has received advance payment by means of an award of employees’ compensation the non-employer defendant can fortuitously reduce their liability and can restrict themselves to contribution to the net amount only. This is, in my judgment, to misunderstand the nature of the claim for damages in the action and the purpose of contribution proceedings in such an action. The object of these contribution proceedings is to apportion the full value of the plaintiff’s claim as between the defendants.”

In my judgment, the court can only assess the contribution recoverable on a just and equitable basis if it takes into account the payment of employees’ compensation paid and if it gives credit for such payment only to the paying tortfeasor. To conclude otherwise would be to gift a windfall to the tortfeasor who has not paid any employees’ compensation.

18.  How does it work in practice? Let us take an example of a case where damages at common law are assessed in the sum of $100, before the deduction of employees’ compensation, and the employer tortfeasor has paid employees’ compensation of $20.  In such a case, the net award of damages would be $80. If the employer tortfeasor and the third party tortfeasor are both 50% to blame for the damage in question, and if the plaintiff levies execution of the entire judgment sum of $80 against the employer tortfeasor, he would be entitled to obtain contribution in the amount of $50 from the third party tortfeasor.  Likewise, if the employer tortfeasor and the third party tortfeasor are both 50% to blame for the damage in question, and if the plaintiff levies execution of the entire judgment sum of $80 against the third party tortfeasor, he is entitled to obtain contribution in the amount of $30 from the employer tortfeasor.

19.  I make an costs order nisi that the 3^rd defendant pays the costs of this application to the 1^st and 2^nd defendants, to be taxed if not agreed.